Regina Felton, PC - Page 5

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          it to Ms. Felton, instructing her to sign it and mail it to the             
          Internal Revenue Service.  The IRS never received it.                       
               Petitioner filed its Form 1120, U.S. Corporation Income Tax            
          Return, for the calendar year 2002 on January 13, 2004.                     
               In the notice of deficiency, respondent determined that                
          Regina Felton, PC is a qualified personal service corporation               
          subject to a special flat income tax rate of 35 percent.                    
          Petitioner filed a petition with the Court challenging                      
          respondent’s determination, stating:                                        
               I operate a law office as a sole practitioner.  For the                
               years 2001 and 2002, it is alleged my taxes were                       
               calculated improperly.  The Revenue Agent advised that                 
               pursuant to IRC 448(d)(2), IRC 11 and 3121(d), the                     
               company should pay a “flat tax” of 35%.  My accountant                 
               disagrees.  The recalculation of the tax under the flat                
               tax causes a substantial increase in tax on diminimus                  
               [sic] gross income.                                                    
                                     Discussion                                       
               For the reasons discussed below, we agree with respondent              
          and decide that petitioner is a qualified personal service                  
          corporation under section 448(d)(2) and is therefore responsible            
          for the income tax deficiencies determined by respondent for the            
          calendar years 2001 and 2002.  We also decide that petitioner is            
          liable for the section 6651(a)(1) addition to tax determined by             
          respondent for the late filing of its 2002 return.                          
          A.  Burden of Proof                                                         
               Generally, the Commissioner’s determinations are presumed              
          correct, and the taxpayer bears the burden of proving those                 





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